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1 million contracts traded - another milestone achieved by Eurex Total Return Futures

1 million contracts traded - another milestone achieved by Eurex Total Return Futures

Achievements are nothing new to Eurex’ Total Return Futures (TRF) on the EURO STOXX 50® Index. Only three months after their launch in December 2016 their traded notional value already exceeded EUR one billion. Now, a little more than one year on, they have reached another important marker: 1 million traded contracts on 3 May, which is equivalent to EUR 35 billion.

We spoke to Markus-Alexander Flesch, Global Head Equity & Index Sales at Eurex, about the reasons for the success:

Markus, what’s the story behind the latest record in Total Return Futures?

The product has been positively received by participants since its launch. It is very encouraging to see them exceeding the mark of one million traded contracts in such a short space of time. The latest uptick in volume is in part due to the return of volatility. We initially saw a market retracement, through our Total Return Futures, investors were able to trade a listed alternative to Total Return Swaps enabling them to hedge forward exposure and the implied repo rate. Hence, demand was high, and product liquidity increased.

When you look back at the 16 months since their launch, in which market environment were your Total Return Futures most useful for your clients?

In general, I would say that the products add value through their ability to provide capital efficiency in the current regulatory environment. If we look at it at a more granular level, TRF had their busiest period as the EURO STOXX 50® Index fell sharply and volatility spiked. These events led to increased hedging of forwards especially from structured products issuers. In addition, the term structure itself steepened considerably which led to new entry points for traders taking advantage of these dislocations.

You already announced that Eurex plans to extend its TRF suite. Can you elaborate on that?

We will indeed look to launch new products in the course of this year. As always, we tackle this endeavour in close co-operation and development with our customers, and this is an ongoing process. With the next TRF contract, we want to build on the success of the existing product to meet precisely the market’s needs. We are currently exploring different TRF applications, be it in the area of Single name TRFs or in a form of a Basket TRF.

Total Return Futures complement the Eurex suite of equity index derivatives and support the market in complying with new financial market legislation.

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